How The Affordable Care Act Could Quash The GOP's Dream Of Medicare Privatization

What if "Obamacare" not only helped save Medicare from fiscal doom, but also quashed the GOP's longstanding goal of privatizing the program? It's too early to know what will ultimately happen, but new evidence suggests that nightmare scenario for conservatives is within the realm of possibility.

In a development with potentially profound implications -- both for Medicare itself and for the broader ideological fight between the two parties over the role of government -- researchers writing in the New England Journal of Medicine believe that the growth in per patient Medicare costs has slowed, contra earlier projections that spending would soar at an unsustainable rate. More importantly, the researchers believe this trend will hold over time, thanks largely to the Affordable Care Act's sweeping cost-control policies.

It's not yet clear whether the trend will be permanent -- one key reason cost growth has slowed has nothing to do with policy or innovation, but rather that the economy has been depressed for years. But the ACA expanded on provider payment savings policies from the 2000s and adopted a plethora of new measures, some of which are already proving successful at reducing spending. On top of that, U.S. medical cost growth, long having exceeded other areas of the economy, is currently at a five-decade low and more closely in line with GDP.

"On the whole, we do not believe that the recent slowdown in Medicare spending growth is a fluke," wrote the researchers Chapin White and Paul Ginsburg. Thanks to the cost-control reforms over the last decade, they added, "the CBO projects that over the next decade Medicare spending per enrollee will grow substantially more slowly than the overall economy." They argued that the ACA in particular lays the framework for longer term cost-control by transitioning the provider reimbursement system from paying for quantity to paying for quality, something even Republicans quietly believe is a good idea.

If the cost-growth slowdown continues into the foreseeable future, it could have dramatic implications on the future of health care policy.

The conservative movement has disliked Medicare ever since its inception in the early 1960s, when Ronald Reagan argued it would spell the end of freedom in America. Half a century after enactment, Republicans have found a potent pretext to dismantle the senior safety-net program: impending fiscal doom. Indeed, official projections in recent years have found that Medicare spending is on course to swallow the entire federal budget in half a century. And that has been the central justification for the GOP's plan, written by Rep. Paul Ryan, to phase out traditional Medicare and replace it with a subsidized private insurance system.

But if the NEJM projections hold, the threat of fiscal catastrophe would lose steam. And that means Republicans would have to resort to ideological arguments against Medicare if they want to end its basic structure -- a hard sell given the program's immense popularity. Prior efforts to dramatically scale back Medicare benefits have fallen flat, and without being able to portray privatization or "premium support" as critical to avoiding fiscal apocalypse, as Ryan does on a regular basis, there's no reason to expect a different outcome.

Ironically, the news of the changing trend line comes amid a congressional debate over the future of Medicare. House committees last week cleared GOP-sponsored legislation to repeal the health care law's Independent Payment Advisory Board, a panel of 15 appointed experts who will be charged with limiting Medicare per-enrollee spending to per-capita GDP growth plus 1 percent -- it would do so via provider cuts, which if too steep could restrict access to care. Part of the reason Republicans want to repeal IPAB is that it may render their push for a privatized system irrelevant.

But the kicker is that if the NEJM study's projections prove to be correct, neither approach may be necessary, and Medicare as we know it will be alive and healthy for the foreseeable future.

About The Author

Sahil Kapur is TPM's senior congressional reporter and Supreme Court correspondent. His articles have been published in the Huffington Post, The Guardian and The New Republic. Email him at sahil@talkingpointsmemo.com and follow him on Twitter at @sahilkapur.